FAWU Statement on increase in Illicit Trade in cigarettes as reported in IPSOS Study

29 November 2018

The Food and Allied Workers Union (FAWU) has noted, with disgust, the latest study by IPSOS Research Institute on the rise in illicit trade of cigarettes that is reported to cost the economy an estimated R 8 billion rand loss in revenue. We are therefore not surprised that researchers found that the illicit sale of cigarettes now makes up a staggering 42 percent of total market share.

Research suggests that a particular brand of contraband cigarettes "RG", produced by Gold Leaf Tobacco Corporation- is trading at a mere R10 and is now one of the most popularly purchased items. With a minimum tax of R 17.85 payable on every pack of cigarettes it is glaringly obvious that the manufacturer is not taxed despite undertakings from the South African Revenue Service (SARS) to "crackdown" on illicit traders of tobacco.

Earlier this year, FAWU has demanded that the National Treasury equip SARS in order to strengthen its abilities to investigate and prosecute those responsible for the manufacturing and sale of counterfeit goods. Up until today, FAWU is still awaiting a clear action plan from the relevant authorities. It appears as if South Africa has become a popular haven for the sale of illicit cigarettes and other counterfeit goods due to the poor ability of the responsible institutions to trace and prosecute culprits.

Secretary of the shop stewards committee at British American Tobacco SA Pty Ltd, Mohau Mokhele, is worried about his job, his family and his co-workers. "These illegal cigarettes are so cheap that it`s impossible for an employer that is paying its tax to remain in business. This threatens my job. It threatens the jobs of my co-workers, our families and our town, Heidelberg", he said

Mohau is not only worried about his own co-workers but also about the 10 000 jobs on tobacco farms in South Africa. "We have marched together, as workers from the factories and from the farms, once to SARS in March 2018 and once to Treasury in August 2018 to protest against this illicit trade. But all we get is promises. We will march to the ANC headquarters next because the ruling party is responsible for this. If we lose our jobs, they will lose our votes and the votes of our families and friends. If we lose our jobs, everyone will know who is to blame", said Mokhele.

In addition, Mohau is even more concerned about the potential inability to sustain the small economy of his home-town in Heidelberg. "We have marched together with the Sedibeng community members and with small traders. If this continues unabated, one will find it very difficult to garner the strength to motivate the family, the neighborhood, the community and colleagues to vote as we use to in the past. No one can vote himself out of his job in the economy that has no capability to create new jobs as we continue to succumb to tax evading tobacco players", said Mokhele.

"This government has no business increasing regressive taxes, such as vat, on law abiding citizens and companies while they are allowing tax-evading companies to take over the market by dodging taxes", he concluded.